When You Should Correct Overpayment | Mann & Elias
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Payroll Mistakes: When You Should Correct Overpayment

Skilled Workplace Lawyers for Overtime, Unpaid, and Overpaid Wages

According to the Workforce Institute, around 82 million Americans reported experiencing paycheck errors at some point throughout their career. Concerns ranged from late payments, wage withholding, overpayment, and underpayment. Across the U.S., unfortunately, many employers fail to comply with federal labor laws. Additionally, when a payroll error arises, they fail to take immediate action to rectify the situation. Delaying not only impacts employer and employee relationships but can also impact the worker’s quality of life if they live paycheck to paycheck. At Mann & Elias, our wage and hour attorneys in Los Angeles work tirelessly to make sure our clients get paid correctly and on time.

It is not uncommon for employees to experience a payroll mistake, particularly those that get paid monthly or work on commission. Employers must have a firm understanding of how to address and correct overpayments to prevent disputes and legalities. There are a few benefits to acting sooner than later. In this article, we answer five key questions that might address a few of your concerns.

If an Employee Gets Overpaid, Can the Employer Reclaim the Overpayment?

The first thing you should do after you notice an unexpected change in pay is to discuss it with your employer. It could be a genuine payroll error or miscalculation of wages or bonuses. When there is a substantial pay increase, employers have the right to take it back.

There is a slight catch. Under normal circumstances, workers get protected from unlawful deductions under Section 13 of the Employment Rights Act of 1996. Unless there is no express provision within your employment contract, the employer can correct the error per Section 14 of the Act.

If your boss made unreasonable deductions or retaliated against you, you may need to seek advice from a Los Angeles labor attorney for employees.

How Can Overpayment Be Recovered?

The company can request reimbursement in one lump sum or installments until they receive full payment. You should expect a notice or written agreement before deductions get made. If the amount is high, an attorney for overpayment in LA would recommend splitting the payments to avoid disagreements. Keep in mind that any deal should be made in writing and signed by both employee and employer.

What Should Be Considered When Recovering an Overpayment?

There are a few factors to consider before adjustments get made in payroll. Read on for four tips:

  1. Review the employee contract and look for a clause regarding deductions in case of an overpayment. It can save both employers and employees time and make the process easier.
  2. Did you notice payroll mistakes over a few months or years? If so, the amount can get high. In this case, avoid making a full payment – opt for a fair payment schedule.
  3. Per Section 14, employers must give notice and seek an agreement. If not, it is considered a breach of trust and confidence. You can refer to a workplace attorney in LA to discuss the possibility of filing a constructive dismissal claim.
  4. Keep in mind that Section 14 is only applicable for overpayments in these circumstances.

What Happens When an Employee Leaves the Company?

When an employee leaves or their employment gets terminated, the employer can still reclaim overpaid wages. However, it will be exceedingly difficult for them to recover. If the company did not provide the final payment yet, an informal request gets made to seek repayment from the former worker. Choosing to refuse could end in a court action depending on previous financial circumstances.

An employer can act the moment an employee refuses to repay. They can also take the following actions:

  • Gather information about the former worker’s employment status to assess whether repayment is possible.
  • Make proposals over some time (an agreement is negotiated with the former employee)
  • Make a court claim (if applicable) against them to address the civil debt and regain lost wages.

Is Securing Legal Defense for an Overpayment Claim Worth It?

When an employee is led to believe that they were entitled to the money, or in some cases, relying on it, they can use this reasoning in court to defend their decision for denying repayment. We recommend having an attorney for overpayment disputes in LA on your side to advise you through the legal process. Because employees do not manage pay, they can address why they needed the money or disclose how it got used when offered the chance to defend their claim.

Resolving this in court should be the last option. To avoid this from happening, employers must address discrepancies immediately by talking to the employee first. If repaying is a financial burden, some companies write off an amount (before legal proceedings ensue).

In the end, California law states employers have three years from the date of overpayment to address and correct the situation. While we hope you never have to go through this, it is best to act quickly if you do!

Need Legal Help? Reach Out to an Employment Attorney in LA

The Law Offices of Mann & Elias is an employment law firm that provides guidance and legal support for individuals facing issues in the workplace. We represent clients at every level of the state and federal court systems in lawsuits regarding discrimination, wrongful termination, unpaid wages, and more. When your case is in our hands, we hope to minimize stress and concerns associated with work.

Workplace disputes and negotiations can be complicated and uncomfortable between an employee and employer. In many cases, an employer can retaliate, causing individuals to feel disadvantaged in the company. When you retain one of our lawyers, you will be well-protected and advised. While there are thousands of lawyers to choose from, we believe our success rooted in:

  • 50+ years of trial experience
  • Excellent advocacy skills
  • Intense preparation and research
  • Quality care

Since our partnership began over 20 years ago, we have settled hundreds of claims, completed 100 jury and bench trials, and recovered more than $18 million in settlements. In the end, our goal is to understand what you need and achieve the best outcome for you by focusing on those needs. For dedicated representation with no upfront fees, give us a call at 323-866-9564 or email info@mannelias.com.


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